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Low-Cost Silver Miner on Path to Produce 7.8 Moz Yearly
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A CIBC World Markets initiation report states that MAG Silver Corp. offers attractive silver exposure as "its metal composition consists of ~56% from silver, which is one of the highest in our coverage universe."

In an April 13 research note, CIBC World Markets Inc. research analyst Cosmos Chiu stated that the firm has initiated coverage of MAG Silver Corp. (MAG:TSX; MAG:NYSE A), an emerging Canada-based silver producer that owns a 44% interest in the high-grade Juanicipio mine located in Mexico's Fresnillo district. The analyst noted that MAG Silver's partner and operator at Juanicipio, Fresnillo Plc., is the world's largest primary silver producer.

The report noted that since August 2020, 16,000 tonnes per month of bulk material from Juanicipio has been toll milled at Fresnillo's nearby processing plant. The analyst noted that a new plant capable of handling up to 4,000 tonnes per day is expected to be completed in Q4/21.

The report from CIBC World Markets indicated that once the new mill is fully operational MAG Silver's 44% share of the asset will transform the company into a substantial producer. The analyst stated that for the first five years of deployment MAG Silver could annually produce around 7.8 million ounces (Moz) of silver at a lowest quartile all-in sustaining cost (AISC) of approximately $7.25/oz.

CIBC's forecast calls for MAG Silver to produce a total of 7.25 Moz silver in FY/22 at an AISC of $5.76/oz that is estimated to generate free cash flow of US$120 million, resulting in a free cash flow yield of 8.1%.

The analyst said that the existing resource and latest preliminary economic assessment (PEA) for Juanicipio were completed in 2017 and noted that since then several new discoveries have been made within this mineralized system including the Pre-Anticipada and Venadas I & II veins, which could serve to expand the resource.

Chiu commented that MAG Silver offers a unique attractive exposure to silver in that "its metal composition consists of ~56% from silver, which is one of the highest in our coverage universe." The report stated that if silver prices were to increase by 20%, MAG's cash flow would increase by 26% and NAV would rise by 19%.

The analyst remarked that MAG Silver is poised to benefit from the upward trend in silver prices. CIBC World Markets indicated that over the long term it sees robust upside potential for the asset from both plant expansion and additional resources.

CIBC noted that in modeling its base case valuation scenario for MAG Silver, it assumed a $29/oz silver price in 2021, $31/oz in 2022, $30/oz in 2023 and $28/oz in subsequent years.

CIBC World Markets presently has a Neutral rating for MAG Silver, with a target price of CA$27.00/share. The stock is currently trading at around CA$22.08/share.


1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: MAG Silver. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
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Disclosures from CIBC, MAG Silver Corp., Initiating Coverage, April 13, 2021

Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Potential Conflicts of Interest:
Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.

In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

CIBC World Markets Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that CIBC World Markets Inc. may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Important Disclosure Footnotes for MAG Silver Corp. (MAG.TO)
2g CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from these companies in the next 3 months: MAG Silver Corp.

For important disclosure footnotes for companies mentioned in this report that are covered by CIBC World Markets Inc., click here: Disclaimers & Disclosures.

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